• Selected
• Entire List

Abstract:
This paper shows that, consistent with a signaling-by-consuming model a la Veblen, income elasticities can be predicted from the visibility of consumer expenditures. We outline a stylized conspicuous consumption model where income elasticity is endogenously predicted to be higher if a good is visible and lower if it is not. We then develop a survey-based measure of expenditure visibility, ranking different expenditures by how noticeable they are to others. Finally, we show that our visibility measure predicts up to one-third of the observed variation in elasticities across consumption categories in U.S. data.

cultural visibility of expenditures, conspicuous consumption, total expenditure elasticity, income elasticity, Engel curves, signaling by consuming

Abstract:
This chapter was prepared for Elsevier's Handbook of Social Economics (edited by Jess Benhabib, Alberto Bisin, and Matthew Jackson). It brings together some of the recent empirical and experimental evidence regarding preferences for social status. While briefly reviewing evidence from different literatures that is consistent with the existence of preferences for status, we pay special attention to experimental work that attempts to study status directly by inducing it in the lab. Finally, we discuss some economic implications.

preferences for status, positional concerns, subjective well-being, conspicuous consumption, positional externalities, relative income, status experiments

Abstract:
Elementary consumer theory assumes that prices affect demand only because they affect the budget constraint (BC). By contrast, several models suggest that prices can affect demand through other channels (e.g. because they signal quality). This alternative conjecture is consistent with evidence from marketing studies. However, neither theory nor evidence is informative regarding the magnitude of non-BC effects. The key econometric challenge arises from the fact that a change in prices typically also changes the BC. This paper uses a lab and a field experiment to disentangle BC from non-BC effects of prices on demand. In our lab experiment we find that, consistent with marketing evidence, prices positively affect stated willingness to pay. However, when examining actual demand, non-BC price elasticities are considerably smaller than BC price elasticities and are often statistically insignificant. Further, these non-BC elasticities do not increase with product uncertainty. Finally, we do not detect any non-BC effects in our field experiment.

consumer behavior, demand, price, quality signals, experiments

Abstract:
We solve Ireland's (1994) conspicuous consumption model (where social-status concerns are introduced into the utility function) for Cobb-Douglas (CD) utility. In the resulting generalized CD consumer model, Engel curves are no longer limited to linearity. In the homothetic CD case, total expenditure elasticities are therefore no longer limited to unity. Furthermore, whether a commodity is a luxury or a necessity is determined by whether it is visible or non-visible to society. Cross-commodity variation in the shape of Engel curves is thus derived from a measurable property of commodities. This reopens the possibility of explaining empirically observed consumption patterns with a CD utility model.

conspicuous consumption, Engel curves, total expenditure elasticity, Cobb-Douglas

Abstract:
This paper analyzes data from Heffetz's (2007) visibility survey. The survey was designed to quantify the relative cultural visibility of different consumer expenditures among U.S. households. We explore the relationship between respondents' demographic characteristics and the expenditures they perceive as visible. We find substantial variation - both across demographic characteristics and across consumption categories - in the relation between demographics and expenditure visibility. Furthermore, we find that our demographic variables have no predictive power for the visibility of some expenditures (such as cars, air travel, jewelry, and home furnishings). At the same time, for most other expenditures (including, for example, housing and utilities, clothing and laundry) there seem to exist visibility subcultures, with different visibility levels among different demographic groups. Finally, while we find sex to be a weak predictor of expenditure visibility, race stands out as a strong determinant of visibility in our data.

expenditure visibility, cultural visibility of expenditures, demographics and visibility, visibility subcultures